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Here are some more frequently asked questions (FAQS) about appraisals.
How Much Does an Appraisal Cost?
The most common type of appraisal is the residential form report required by lenders. In urban areas, the going rate for this report (as of December 2001) is about $300 to $400. Expect to pay more in rural areas where properties are more complex and take more time to inspect, and where comparable sales are more difficult to find.
The cost of an appraisal depends on the type of property being appraised, the local real estate market, the scope of work required, the intended use and the intended users. Complex residential properties, commercial real estate and private (non-lender) work can range from several hundred to several thousand dollars. Also, as more people rely on the appraisal the appraiser’s liability increases and most appraisers will charge accordingly.
How Long Does it Take to Get an Appraisal?
An appraiser’s turnaround time depends on how much work there is and how many appraisers serve the local area. In rural areas where there are fewer appraisers, turnaround times can be long during hot real estate markets or when interest rates are low and everyone is refinancing. Also, appraisers who do a lot of commercial and non-lender work tend to be more backed up than those who do residential lender work.
Residential lender work makes up the vast majority of appraisal business, and this work follows a boom and bust cycle. During the long real estate bust of the middle 1990s a lot of appraisers went out of business and did not renew their licenses. This has led to a shortage of appraisers as the volume of residential loans increased during the late 1990s and early 2000s.
People have been reluctant to enter the appraisal profession because of the tough education and experience requirements, high licensing fees, liability exposure and the uncertainty of future work.
Can I Find Out What the Value of My Property Will Be Before Hiring an Appraiser?
Appraisers aren’t supposed to accept assignments or base their fees contingent on the reporting of predetermined values, opinions or conclusions. For example, an appraiser can’t accept an assignment for appraising a house based on what the lender, borrower or real estate agent needs to make the deal.
Some lenders and mortgage brokers ask appraisers to do a free “comp search” or preliminary value estimate for a property before they will give them the appraisal assignment. Appraisers who comply are putting themselves at risk. Someone is relying on the appraiser’s “preliminary” estimate to make a major financial decision. Any estimate of value, verbal or written, range or point, is an appraisal in the eyes of the law and is subject to the requirements of the Uniform Standards of Appraisal Practice (USPAP).
This is a Catch-22 for both appraisers and their clients. If the appraiser follows the rules they risk losing the client; if they don’t follow the rules they risk losing their license. The client can’t find out what their property is worth without paying for an appraisal, and they don’t want to pay for an appraisal without knowing what their property is worth.
Some appraisers approach this dilemma by charging a portion (usually half) of the fee up front to inspect the property, select comparable sales and produce a preliminary value estimate, usually a value range. If this is acceptable to the client they can continue with the appraisal. If not, the client is only out a portion of the appraisal cost and the appraiser has not violated any professional standards or practices.
How Do I Get a Copy Of My Report?
When you apply for a real estate loan, the lender hires the appraiser. Some lenders and mortgage brokers will ask you to select the appraiser yourself and even pay them at the time of the inspection. However the lender (not you) is the appraiser’s client. If you want a copy of the report you have to ask the lender. If you are ordering a private (non-lender) appraisal for your own use, you are the client and the appraiser will give you a copy of the report.
Can I Use the Same Appraisal More Than Once?
Suppose you’ve picked a lender, gotten your house appraised and then decide you want to work with another lender who is offering you a better loan. You have a copy of the report the first lender gave you. Can you just send it off to the new lender? No you can’t. Even though you have a copy of the report, you are neither the client nor the intended user. Appraisals prepared by licensed appraisers must identify the client, the intended use, the intended user and an effective date of value. If any of these change, you need a new appraisal.
If the appraisal is less than six months old and the property and market conditions have not changed, most lenders will accept a “retype” or “reassignment” of the appraisal. Most appraisers charge a small fee for this. It would be unethical for an appraiser to charge a full fee for a new report which is essentially a copy of the first one. Because appraisers have the right to choose who they work for, they may decline to reassign an appraisal to a new client.
There is some controversy about whether or not the original client must sign a release before the appraiser can reassign the appraisal to a new client. If any confidential client information is at stake, the first client must issue a letter releasing their interest in the appraisal. This is more likely to happen in private (non-lender) work. If the lender has sent a copy of the report to the borrower they have already broken or extended confidentiality and no release is necessary.
If the appraisal is older than six months, most lender clients will require a new appraisal or at least an “appraisal update.” The appraiser reinspects the property, searches for new comparable sales and enters a new date of value. This could involve a little work or a lot of work. The value estimate may or may not change. With both retypes and updates, the appraiser should disclose the original client, previous value estimates and dates of value.
If your house was appraised for estate purposes you can’t use the same appraisal to get a loan. This protects the people who rely on the appraisal and also protects the appraiser by limiting his or her liability exposure.
What is a Drive-By Appraisal?
Drive-by appraisals are a type of limited appraisal conducted without an interior inspection of the property. They require shorter forms and produce faster turnaround times, which both lenders and borrowers like.
From the lender’s point of view, the appraisal is only a small part of the lending decision. Often they are more concerned about your income and credit history than what they could sell your house for if you defaulted on the loan and they had to foreclose. When interest rates are low, appraisers often get backed up for weeks and become a bottleneck in the mortgage lending process.
While drive-bys can be useful in urban areas with cookie cutter subdivisions, they may not be appropriate in rural areas where every property is different and many homes can’t even be seen from a public roadway. Appraisers increase their liability exposure by accepting drive-by assignments.
The lending industry has become highly competitive. Banks have merged, streamlined the loan process, closed branch offices and installed automated tellers. Lenders are using more limited types of appraisals including computerized automated valuation models to support their loans. Today, you may be able to buy a house, refinance or get a home equity line of credit without ever seeing an appraiser.
What If I Don’t Agree With the Appraiser’s Estimate of Value?
Appraisers, like everyone else, make mistakes. If you find an error or have information which should have been included in the report, let the appraiser know and ask them to revise the report and change their estimate of value if necessary.
If the appraiser has not made any errors, but you just don’t like their opinion of value, you have no choice except to hire another appraiser. Appraisers are constantly pressured by clients to produce an estimate of value which serves the client’s purpose. This is understandable when you consider the large sums of money that are often at stake in real estate.
Licensed appraisers are required to perform their assignments with impartiality, objectivity and independence and without accommodating any personal interests. For example, appraisers can’t take sides when they appraise property for divorces or partnership dissolutions. When giving expert legal testimony, appraisers can only advocate for their opinion of value, not for their client, regardless of who is paying the bill.
This is the appraiser’s Catch-22. Appraisers who resist client pressure may find themselves out of work. Appraisers who succumb to client pressure risk losing their license, paying fines and even going to jail. If the client obtains a fraudulent appraisal for any reason they could also find themselves in legal trouble.
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